Lawmaker unveils bills to reduce RI sales tax

PROVIDENCE — The lawmakers say it’s time to take bold steps to help Rhode Island’s economy.

PROVIDENCE — Saying it’s time to take bold steps to help Rhode Island’s economy, state lawmakers unveiled two bills Tuesday that would reduce the state’s sales tax.

One bill would cut the tax from 7 percent to 3 percent, at a projected cost of $467 million.

The other would eliminate the sales tax on heating and utility bills and reduce it to 6 percent on most other items, while leaving the existing taxes on meals and beverages, hotels, telecommunications and motor vehicles unchanged. The projected revenue loss in that case is about $99 million.

Rep. Jan Malik, who is sponsoring the House version of the bills, said he is open to suggestions on the legislation but believes something needs to be done.

“We may want to pretend that a 7-percent sales tax is not hurting us as a state, but there is no denying that Rhode Islanders are driving to Massachusetts and Connecticut to save money,” the Democratic lawmaker said. “If we want Rhode Island businesses to fail, we can just do nothing, because the status quo is a recipe for failure.”

Malik, a Warren liquor store owner, says he already has about 40 cosponsors for the bill that would lower the tax to 6 percent and about 32 cosponsors for the bill that would lower the tax to 3 percent. But passage is hardly assured. While new House Speaker Nicholas Mattiello has said he is committed to enacting tax reform this year, there are competing bills that would cut other taxes, such as the inheritance tax and the corporate tax rate.

Malik has long been a critic of Rhode Island’s sales tax. He sponsored a bill last year to repeal the tax; it did not pass, but lawmakers passed a revised version that formed a commission to study the issue. Malik and Sen. Walter Felag, D-Warren, chaired the panel, which met for several months but did not issue formal policy recommendations. Rather, Malik said lawmakers would use ideas from the meetings as the basis for legislation.

At 7 percent, Rhode Island’s sales tax is tied for second-highest in the country and is higher than those in Massachusetts (6.25 percent) and Connecticut (6.35 percent), though Rhode Island’s tax affects a smaller list of items, exempting more than 60 goods and services. Still, the tax is Rhode Island’s second-largest revenue producer. For the fiscal year that ends June 30, state officials are projecting it will bring in $904 million.

While Malik and Felag talked about a reduction, another person who served on the commission said she opposes the bills.

“We cannot afford the loss of revenue that would result from these proposals, or to make cuts to the kinds of investments that really create jobs, like education and infrastructure, in order to pay for these proposals,” said Kate Brewster, executive director of the Economic Progress Institute. Brewster said the “most reasonable thing to do” is to “lower our rate to 6.25 percent” to match Massachusetts and “broaden the base to pay for it.”